When land/property is bought by two (or more) owners they have an interest in the land and are therefore co-owners. They may own it as joint tenants, which means they are both entitled to the whole property leading to less formality when either dies. Alternatively they may own it as tenants in common, in which case they will each have a defined share in the property.
A declaration of trust is a legal agreement made between the joint owners of the property and will contain information about the amount each owner has contributed and what share of the property each is entitled to on death or if the property is sold. The declaration may also go on to describe a mechanism for resolving disputes between the owners, though these sorts of provisions are better placed in a cohabitation agreement, or, if relevant, a pre-nuptial agreement.
We always advise that a declaration of trust is put in place if you are buying a home with a partner or friend and purchasing the property as tenants-in-common, or where there is a contribution from a third party which is not to be treated as a gift. If you are buying your first home together and your contributions are not equal, it may not seem very romantic but could save a lot of heartache if there is a breakdown of the relationship in the future.
When a property is owned as a tenancy-in-common and one partner dies, their share will pass according to the terms set out in the deceased’s will, or, if there is no will then the rules of intestacy would come into force. This means that the surviving partner has no means of controlling who would own the deceased owner’s share of the property. Therefore it is vital, in addition to ensuring a declaration of trust is in place, that up to date wills are written.
Wills & Tax Partner Lee Young says, "As part of the property purchase process we will advise if a declaration of trust is required, but if you have already bought your property and think that a declaration of trust should have been done when it wasn’t, then we will be happy to assist."
We have offices in Christchurch and the New Forest. Our Wills & Tax team also cover Bournemouth and Poole. For a free initial chat, please call 01202 499255 and Lee or a member of the team will be happy to discuss any questions that you may have.
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